- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 6. Depreciation Methods
CFA Practice Question
Depreciation accounting is a system of accounting that aims to ______
B. periodically allocate the cost of a tangible long-lived asset over its estimated life.
C. distribute the cost or other basic value of tangible capital assets, less salvage, over the estimated useful life of the unit in a systematic and rational manner.
A. record the carrying value of an asset.
B. periodically allocate the cost of a tangible long-lived asset over its estimated life.
C. distribute the cost or other basic value of tangible capital assets, less salvage, over the estimated useful life of the unit in a systematic and rational manner.
Correct Answer: C
User Contributed Comments 10
| User | Comment |
|---|---|
| past1sttime | what if you use double declining balance to depreciate the asset, salvage value does not come in to play. |
| golflover | then the salvage value would be 0. |
| bundy | Less salvage value is key there |
| moneyguy | Yes, B does not state salvage value, so it's false. |
| bidisha | when in doubt pick the longest answer |
| vatsal92 | @Bidisha: I kinda do the same. :p |
| shash0678 | Why not A - Isnt the carrrying value same as depreciated value?? |
| Inaganti6 | @bidisha HAHAHHAAHHAhahahah |
| Kiniry | @past1sttime: With double declining balance, salvage value DOES come into play. You stop depreciating at salvage value, during the last year of the useful life. example: If carrying balance is $100,000, and double declining would lead to depreciation of $40,000, but salvage value is $80,000, you only record a depreciation expense of $20,000, not the full $40,000 |
| EEEEvia | whichever is longe |